Posted on 12/29/2018 7:22:20 AM PST by SeekAndFind
Woke up this morning and saw the futures were a lot lower. Of course, yesterday they had a record rally. The day before, a record drop. It’s called volatility.
I have a couple of observations as an old time trader. I just wish I was on the top step to take advantage of it.
The other day I said to “Buy Em” on Twitter. Logically I think fears of a government shutdown and totally overblown. The press hates Trump and you have to figure that any news they report goes through that filter. Any news. Heck, they gave his wife Melania grief for wearing Timberland boots on their recent trip to visit the troops in Iraq.
The other reason I said “Buy Em” is that corporate America is in good shape. Markets don’t drop when that is the case.
The other reason I said “Buy Em” is that there was never gonna be an issue with the Federal Reserve Chairman. If you don’t understand Trump by now, I can’t help you but he works through a lot of things publicly on Twitter. He has a controlling personality like a lot of Presidents. I think he does take a while to ponder decisions, and he often does do publicly. Once he gets it in his gut, he goes. It is hard to figure out what a “Trump doctrine” is because he’s not a dogmatic politician he is a businessperson. Businesspeople go with the market. The one thing you can count on with Trump is he is going to fight for what he thinks is best for America. Replacing the Fed chairman isn’t what’s best for America but he doesn’t think it hurts to publicly disagree with him.
Personally, I don’t think it’s helpful to air a lot of the dirty laundry on Twitter but a lot of Americans want more transparency and that is one way to get it.
Today the futures are opening south because of China. China is a huge concern and the reason the market hasn’t accounted for it in the past is that past Presidents have been pretty wimpy about the Chinese. This President is making everything more transparent. The Chinese are communists. Never forget that. If you start with that frame of reference, it helps with any analysis. The Chinese news isn’t new. It’s just being focused on by the chattering class.
The Democrats taking control of the House wasn’t helpful to the market either. They are banging the drums of impeachment and like the opposing party with President Obama before them are indicating that they will be pretty obstructionist where they can.
All of this brings a lot of volatility to the market because of the uncertainty. Who knows what the outcome will be?
I still say now is the time to look for stuff to buy. As my friend Josh Brown said, Warren Buffett isn’t watching the news or the ticker. He’s combing through 10-K’s.
First, I don’t care what all these touts out there say. The average person cannot beat the market. Don’t be a schmuck. Index funds are where it is at for the average person. If you are going to beat the market, you have to have some sort of edge, or some other strategy that is counter intuitive to the marketplace. The herd cannot beat the market.
Second, ignore all the pundits yammering. They are only trying to keep your eyes glued to a television or sell their tout sheet or a book. Even when they speak, they say things to create doubt. “What if”. The market is full of “what ifs” today. What if this happens? What if this happens? Ignore it. Totally out of your control anyway.
You cannot chart your way to success in a market like this. Charts are accounting. They show where the market has been but don’t predict the future. They can give you clues, but just because some gap or some point happened in the past doesn’t mean it is meaningful in the future. New information is being priced into the market continuously.
The last thing I want to say is that we are in an electronic marketplace. I don’t want this to be seen as a criticism because it isn’t. It just is. The market is not a human driven thing anymore. In years past, a trader might make a stand. JP Morgan famously stopped a couple of crashes singlehandedly. Blair Hull stepped in back in 1987 and started buying. Electronic markets don’t have that.
I have noticed that there is a lot of liquidity in the market when you don’t need it-and no liquidity when you really need it. Back in the day when things were volatile, we would trade from point to point. You didn’t see big jumps. If the market were to go from 2400 to 3000 it would trade pretty near every tick in between those two numbers. In electronic market it trades at the edges.
Let’s say you got short at 2400. You got no real chance to get out until the move is finished. That is unless you are super small when it comes to the size of trade you put on.
In a human driven market, you could actually get a gut feel of what was going on. There was time. You could see things start to slow down or coagulate around a point. In electronic markets things happen so fast that the market never slows down and it never seems to take a breather. Breathers are really choppy and in hindsight you can see them on charts. But, in the moment, it’s really hard to even understand what is going on.
I do think we need to think a lot about how our market is structured today. I don’t think we benefit from trading in milliseconds when seconds might do just fine. As 2012 Nobel laureate Alvin Roth said in his book, electronic marketplaces distort when they go too fast. He studies market structure and design. Most of his research looks at marketplaces for school choice or organ donation but it is applicable to any market. He has a whole chapter in his book on electronic marketplaces.
What’s the solution to volatility? Certainty. When we gonna get it? Nobody knows. But, I wouldn’t be short America.
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Jeffrey Carter is a general partner at West Loop Ventures. In April of 2007, he co-founded Hyde Park Angels and spearheaded the growth and development of one of the most active angel groups in the United States. He has consulted on the startup of several other angel groups. He is a former independent trader and member of the CME Board of Directors and was part of a small group that transformed CME from an open outcry exchange to the largest electronic exchange in the world. In 1998, CME was worth $182,134,000 in membership enterprise value. Today it’s worth $55 Billion.
West Loop Ventures is based in Chicago and invests in B2B Fin Tech companies that are revolutionizing the backbone of finance.
He is a graduate of the University of Illinois College of Business, and has an MBA from the University of Chicago, Booth Graduate School of Business. Mr. Carter is a long suffering fan of Chicago pro sports teams. As a lifelong Chicago Cubs fan (see his Twitter profile picture) he will attend Chicago White Sox games at Guaranteed Rate Field if you have good seats and the first beer is on you.
He is a free market advocate based on his experiences with free transparent marketplaces.
look at the volume associated with the volatility,it aint there.
IMO were looking at mechanized trading chasing mechanized trading.
There is investing and trading and algorithms are trading this market, not investing in it.
Let the guys with experience come back next week from Christmas and NYrs vacation and watch this thing stabilized. To bad the algorithms and rubies minding the store tanked the market for a bit, but good thing is short long cap gains and divs were reinvested at lower prices
Those funding a plan should be pleased
To bad the algorithms and “rubies”
Rubies spodah be “Newbies”
“Rubies” = “Newbies”
spodah?
One mystery solved.
One new mystery.
(Just kiddin’ ya.)
ebonics
Thx for the heads up
“spodah be”=supposed to be
I think
“Prolly”
Absolutely spot on.
u know that be right
Unless you are in the ‘business’ the market is a loooong term game.
Me too. So what?
I learned that at 18 Now retired
I barley made it through high school and not concerned about the “Market” being a self taught, buy and hold frugal cheapskate
There are a lot of baby boomers cashing in. This rarely gets mentioned.
Yep - computers working off algorithms is what causes the roller-coaster rides...one trips a “buy” signal and they all crank out in nanoseconds....
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